This package of bills represent a sizeable reform to the regulation of credit across Australia, with payday lenders, finance companies and mortgage brokers set to become federally licensed entities. The introduction of a federally licensed system in turn means business will need to adjust, and with that adjustment will be frustrations felt by business as a result of the adherence to yet another layer of red tape.

With regard to the implementation of this legislation, the coalition certainly hopes that this government is able to be responsive and listen to the needs of business and industry and not take the arrogant approach which has been demonstrated of late, an example of which we all saw during the budget night changes to employee share schemes earlier this year that virtually brought an industry segment to its knees pending it being revisited.

When looking at the set of bills as a package, there are four key objectives: the creation of national credit laws with licensing arrangements; the introduction of responsible lending provisions—taking effect from 1 January 2010 and 1 January 2011, depending on the type of provider; universal compulsory membership of external dispute resolution, EDR, providers for Australian deposit-taking institutions, ADIs, and non-Australian deposit-taking institutions; and the introduction of a new national consumer credit code protection mechanism which replicates and replaces the state based UCCC.

In terms of public scrutiny, the primary bill was made public in late April this year, and it was clear from this initial process that the first draft of the bill carried very considerable problems. The coalition notes that a number of key changes have taken place since then, including changes to responsible lending requirements, which have been set back for authorised deposit-taking institutions and will not begin operation until 1 January 2011. Point of sale, POS, retailers have been exempted for 12 months, subject to review, and arrangements for credit assistants were simplified, with some duplicate requirements removed.

I will now turn attention to the objectives of the bill, the first of which is the licensing arrangements of the national credit laws. The body overseeing the provision of credit under the new national laws will be the Australian Securities and Investment Commission, ASIC, which will license providers and administer licence requirements from November 2009. As a result of this, there will be a new licensing regime, which will be known as the Australian credit licence. ACL will provide licences to brokers, financiers and credit intermediaries. The lending activities requiring licences from the Australian credit licence will be, largely, credit contracts, credit services, consumer leases, mortgages and guarantees. Holders of a licence from ACL will, in turn, be allowed to lend and collect money under a credit contract and as brokers or intermediaries, or provide assistance with a credit product. It will be compulsory for the licensee to provide credit guides which will disclose all applicable commissions, fees and charges. It is also worth noting that other bodies set to be streamlined into the Australian credit licence process will be current Australian financial service licence holders already licensed to provide credit services under existing legislation.

The coalition has sought assurance from the government that holders of Australian financial service licences will not be subjected to overregulation and that just one of these licences will suffice. We are mindful of the impact the implementation of this system will have on the national marketplace and we are focused on ensuring that the licensing arrangements are not excessive and do not place an excessive demand on business. Such concerns have been raised by the coalition during the entire process of review of the legislation before us. It is also our understanding that the government is looking to exempt companies which provide loans to directors, as they may be caught in this legislation and therefore require a licence. That, of course, will be a very welcome relief for many businesses around the country.

I now move on to the next objective of the bill before us, which relates to responsible lending. In the coalition’s view, this is where a great many potential problems lie, particularly for individuals and businesses. The provisions within the legislation are designed to aid consumers when they make decisions about credit. Within the legislation there are two tests which the loan provider must meet, and definitions within these tests are to be developed by ASIC. The first test is that loan suitability must be individually determined by the provider, and the second test is that the loan recipient’s capacity to repay the loan must also be assessed. The coalition is aware, through liaison with industry, that such procedures are followed currently when loan assessments are made. One of the primary issues of the responsible lending provisions is their workability for credit-reporting purposes. Despite not coming into effect until 2011, it remains unclear as to how, without positive or comprehensive credit reporting, these provisions will operate. This will pose a number of difficulties from both a practical and an operational point of view.

A roundtable consultation on this matter, which began in August last year, is currently being conducted by the Special Minister of State. As the outcome of this review will have a significant impact on the workability of this legislation, the coalition has expressed the view that it aspires to having this legislation expressly considered in this process. In fact, we have called on the government to speed up the process because, without reform in this area, the legislation before us will not work. It certainly will not work as intended and indeed it could be detrimental to consumers and the banking and credit system. It is important to get all of these matters lined up. The coalition has also suggested a further practical measure that the government could consider in order to ease the compliance burden on financial institutions. The start date of 1 January 2011 will prove to be cumbersome, as most financial institutions freeze their systems over the Christmas break in order to withstand the level of increased transactions. A more practical solution to this problem could be the deferral of the start date to 1 March 2011.

I now move on to the third objective of the bill before us, which relates to the universal compulsory membership of EDR, external dispute resolution, providers for Australian deposit-taking institutions and non-Australian deposit-taking institutions, non-ADIs. The legislation proposes a three-tiered dispute resolution system for consumers: through the licensee, through ASIC’s approved scheme and through the court system. Under this legislation, consumers will be able to apply for hardship variations, postponement of enforcement actions, regaining possession of mortgaged goods and actions against unconscionable fees and charges imposed by credit providers for small amounts—that is, for amounts less than $40,000.

Finally, the fourth objective of the bill before us is the introduction of the new National Consumer Credit Code protection mechanism, which essentially replaces the state based Uniform Consumer Credit Code, or UCCC. This is designed to enhance consumer protection through raising hardship thresholds from $330,000, where they are at currently, to $500,000. Amongst other settings, it also prohibits the use of essential household goods as security for loans. Overall the objectives of the bill before us here today in the Senate are, we think, sound and worthy of support, despite our misgivings about some matters that I have highlighted. The coalition support the national system of licensing credit, and we do think it is particularly worth while from a consumer protection point of view. Whilst the responsible lending provisions are well intentioned, it remains to be seen how the government will manage this process leading up to the start dates in 2010 and 2011.

The coalition recognise the size of the reforms which we have under consideration here today and the compliance burden that these impose on Australian businesses—which in turn means that the government must be responsive to the needs of industry. We certainly urge that most strongly on the part of the government. The coalition understand that the government will be moving some technical and timing measures amendments in the committee stage, which, in the form we have been advised of, the coalition would be disposed to agree to.

Finally, I want to express the coalition’s fervent hope that the government, ASIC and Treasury will make themselves available to those businesses which need assistance in implementing this legislation. We do think there will be some significant teething problems and it will be necessary for business to have recourse to the government and various officials in Treasury to clarify that the provisions are operating in the way they were intended to and that they do, as developed, give effect to what are some very technical provisions. With those comments, I commend the bills to the Senate.